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Alejandra on Twitter discusses the financial aspects of extended warranties. She explains that twelve percent of the typical extended warranty cost covers the statistical probability of the item breaking. The rest of the money goes towards salaries, overhead, profit, and marketing fees. In most cases, well over half goes to the organization selling the warranty. For example, if you buy a $1500 extended warranty for your car, the dealership likely made $700 on that, while the average repair cost would only be $180.
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